Lib Dems would raise £8bn in taxes on mansions, banks and wealthy foreigners

London Terraces

The Liberal Democrats would raise £8bn in taxes from the wealthy and big business, as well as signing up to £4bn more in cuts to welfare including working-age benefits, Nick Clegg will say on Thursday.

Setting out their party’s financial plans, Clegg and his economics spokesman, Danny Alexander, will say £30bn needs to be saved by 2017-18 to help balance the UK’s books, with almost 50% coming from tax rises and tackling avoidance. Just over 50% would come from spending cuts.

Clegg and Alexander have so far only worked out how to raise around half of £8bn in tax rises through a levy on mansions, the banks and wealthy foreigners, as well as scrapping free television licences and bus passes for better-off pensioners. That leaves them with a £4bn tax hole to plug before the party publishes its fully-costed manifesto. However, they will promise on Thursday not to back an increase in income tax, national insurance, VAT or corporation tax. About £6bn would come from tackling tax avoidance and £12bn from departmental spending cuts.

The tax plans contrast with those of the Conservatives, who do not want to raise taxes at all and would reduce the deficit entirely through spending cuts and tackling avoidance. It is likely to be seen as a victory for the business secretary, Vince Cable, who argued for a higher proportion of tax rises last October. Labour have said they would reduce the deficit over a slightly longer time through an unspecified mix of tax rises and spending cuts.

The welfare cuts of £4bn are much lower than the £12bn that the Tories claim are needed. However, the Lib Dems have previously claimed to strongly oppose further welfare cuts. At the time George Osborne announced plans to freeze benefits, a senior Lib Dem source said such benefit cuts for the working-age poor were unfair. Decisions on benefit uprating “should be taken at fiscal events and in light of the fiscal circumstances,” he argued at the time.

Outlining his plans in central London, Clegg will commit to saving £650m by capping benefit rises at 1% for two years, as well as £125m from removing winter fuel payments and free TV licences. A senior Lib Dem source said the plans were fair because inflation is so low. The party has not yet set out details about where the remaining more than £3bn in welfare cuts would come from.

The Lib Dem leader will also reaffirm his commitment to the two rules under the charter of fiscal responsibility: balancing the cyclically adjusted current budget by 2017-18, and having debt falling as a percentage of GDP in 2016-17.

He will also promise to protect NHS funding and the international aid budget. In addition, he will promise to protect the education spending “from cradle to college”, and “maintain the triple lock” on the state pension.

Clegg said: “Liberal Democrat plans are for a bigger tax contribution from those who can afford to pay: the wealthiest individuals and big businesses which are not always paying their fair share.

“We do not wish to raise the tax burden on those on low and middle incomes, which is why our plans do not involve any increase in the rates of income tax, NICs and VAT.

“In fact, we want to cut the taxes of those on low and middle incomes … If public services and the most vulnerable in society are to be protected, then the wealthiest and big business will have to pay their fair share.”

Powered by article was written by Rowena Mason, political correspondent, for The Guardian on Thursday 5th February 2015 00.01 Europe/London © Guardian News and Media Limited 2010